Trade and External Sector

Trade & Export Policy and External Sector

April, 2014

Introduction

India’s gross domestic product (GDP) growth is likely to expand by six per cent next financial year and by eight–nine per cent in the next three years, highlighted Mr Anand Sharma, Union Minister for Commerce and Industry, Government of India.

The strong ecosystem set up by the government over the last decade has seen the economy grow from US$ 500 billion to about US$ 2 trillion, and the country’s per capita income has nearly trebled in that period. India’s trade and external sector has had a significant impact in this growth.

In recent developments, Indian solar installations are forecast to be approximately 1,000 megawatt (MW) in 2014, according to Mercom Capital Group, a global clean energy communications and consulting firm.

The country has also emerged as one of the global leaders in green buildings. India has over 2,380 registered green building projects and is among the top five countries in the world involved in spearheading the global green building movement, as per Mr Bharat Kamat, Vice-Chairman of Indian Green Building council (IGBC), Goa. The building stock in India is expected to reach 100 billion sq ft from the existing 25 billion sq ft by 2030.

Capital Inflows

India's foreign exchange (Forex) reserves stood at US$ 298,635 million as on March 21, 2014. Foreign currency assets aggregated to US$ 271,394 million and the value of gold reserves stood at US$ 20,978 million, as on March 21, 2014, according to the weekly statistical data released by Reserve Bank of India (RBI).

Private equity (PE) firms invested US$ 2.27 billion in the January–March quarter of 2014 compared to US$ 1.18 billion in the same quarter last year, registering an increase of 93 per cent.

To facilitate receipt of foreign inward remittances directly into the bank accounts of beneficiaries, the RBI plans to allow such remittances to be transferred to the know-your-customer (KYC) compliant beneficiary bank accounts through electronic mode.

Foreign Direct Investments (FDI)

India remains one of the top destinations for FDI, said Mr Anand Sharma, the Union Minister for Commerce and Industry, Government of India. India has attracted FDI worth US$ 172.82 billion during the period 2009–13.

The total amount of FDI inflow into India (including equity inflows, ‘re-invested earnings’ and ‘other capital’) from April 2000 to January 2014 stood at US$ 318,885 million, according to data released by Department of Industrial Policy and Promotion (DIPP). The cumulative amount of FDI equity inflows during April 2000 to January 2014 stood at US$ 212,031 million.

Foreign Institutional Investors (FII)

FIIs invested US$ 13.25 billion in equity market during FY 14, as per data released by Securities and Exchange Board of India (SEBI). FIIs started the financial year on a positive note and infused more than US$ 4.33 billion in the first two months of FY 14 on the back of various reforms initiated by the Government of India.

After selling stocks through January and at the start of February 2014, foreign investors have been net buyers of Indian equities for 15 straight trading sessions. Since February 12, 2014, they have invested nearly US$ 1.1 billion into Indian stocks, helping benchmark Indian equities scale new peaks. In calendar year 2013, the Indian markets had seen FII inflows of nearly US$ 20 billion.

Exports

Indian exports stood at US$ 282.7 billion during April–February in FY 2013-14 registering a year-on-year (y-o-y) growth of 4.79 per cent.

Export of Indian cashew kernels grew by 16 per cent to touch 90,244 tonnes in the first nine months of FY 2013–14.

Leather exports from India have increased by 17.5 per cent during the April 2013–January 2014 period against the comparable period of 2012–13, according to data from the Directorate General of Commercial Intelligence & Statistics.

In order to lend support to exports, Mr P Chidambaram, Union Minister for Finance, Government of India, has approved additional funds worth Rs 2,000 crore (US$ 331.13 million).

External Sector

India is on its path to prove itself as an important destination globally. A snapshot of the same is highlighted below:

India and the Netherlands have signed a memorandum of understanding (MoU) to set up an Indo–Dutch Joint Working Group to facilitate the exchange of technical and institutional knowledge on clean energy.

India and South Korea signed five agreements at the end of delegation level talks between Ms Park Geun-hye, the visiting South Korean President and Dr Manmohan Singh, the Prime Minister of India in January, 2014.

India and Sudan have good potential for enhancing cooperation in promoting renewable energy, said Dr Farooq Abdullah, Union Minister of New and Renewable Energy, Government of India. He also offered to provide Indian assistance for developing renewable energy resources in Sudan.

“Malaysia and India have very strong cultural and commercial links… India is a country where we would like to step up our relations on all fronts,” highlighted Mr Mustapa Mohamed, the Minister of International Trade and Industry for Malaysia. The total trade between the two nations was US$ 12.3 billion in the period January–November 2013.

Scotland is offering a slew of facilities for Indian pharma and biotech companies to conduct clinical trials, according to Ms Rooma Bussi, Country Director – India, Scottish Development International (SDI). The bilateral trade between India and Scotland is around US$ 665.90 million, as per SDI data.

Foreign Trade Policy

To attract more investments into the equity and debt markets, the RBI has decided to put in place a framework for investments which allows foreign portfolio investors to participate in open offers, buyback of securities and disinvestment of shares by Central or State governments.

India has signed a tax information exchange agreement with Argentina. This pact with Argentina would allow Indian tax authorities to attain specific information, including banking related, on tax evasion cases. This is the tenth such pact in the past three years.

South Africa plans to offer special incentives to tap investment from India in the special economic zones (SEZs) being promoted across each of its nine provinces.

Road Ahead

The Indian economy has inherent strengths which give it resilience from external pressures and the series of steps taken by the government both on the fiscal and current account front have yielded positive results, said Mr Anand Sharma, Union Minister for Commerce and Industry, Government of India.

India is being identified as one of the most important players in the globally changing economic landscape. There is a parallel process of business and industry in the country which brings forth new opportunities that economic developments in India have created.

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